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Written on 2nd December 2008
0 COMMENTS 
Ernst-Jan Pfauth, editor in chief
As Boris reported a few weeks ago, LinkedIn is doing well in these harsh economic times. People fueled by angst surf around the service to get in touch with headhunters. An example from Japan learns us that there’s another successful business opportunity for times like these: fortune telling.
Worried Japanese Internet users surf to Zappallas’ fortune-telling websites to find some reassurance in crystal balls, tarot readings, I-ching and horoscopes. These mobile sites have names like “Your Future in Three Months” and “Certain Fate”. All together, they stirred a 61 percent rise in net first-half profit.
The group which spends most time on finding reassurance? Women between 20 years to 34 years old. Not a bad target group…
Reuters notes the commercial success of Zappallas:
Registered users, who pay a set monthly fee, climbed 21 percent from a year earlier to 2.2 million at the end of October. That’s even as consumers rein in spending on new mobile phones and PCs, which they use to click on Zappallas’s 443 sites.
“Fortune telling is content that has been around for thousands of years,” said Zappallas spokeswoman Kumiko Wada to Reuters. “We now treat it as a bit of fun, but there’s depth and a history there of people turning to it for guidance in tough times.”
So if you were looking for a money machine, you might try the ancient art of fortune telling. You might some people gifted with the craft of tarrot and hand reading on LinkedIn.
Written on 14th November 2008
1 COMMENT
Patrick de Laive, Internet entrepreneur and co-founder of The Next Web Conference. Twitter: @patrick
In 1987 we had a major stock market crash, ten years later (1997) another correction of the stock prices made us shiver and in 2001, still fresh in mind, the bubble burst, resulting in a vaporization of almost all Internet related stocks. We can say that 2008 is a dramatic year for stocks, but also for the worldwide economy.
We, the people, lost huge amounts of money (wealth) during each and every of these crises, but many people earned their fortune during these bearish times. The difference between a good economy and a very bad one is that during a good economy the wealth of a lot of people increases, during a bad economy Joe and Jane Schmo loose wealth but there are still big winners. You could argue that under certain circumstances the stock market is a zero sum game, meaning that for every dollar won someone else lost 1 dollar (conventional economics state that the stock market is not a zero sum game, it is not easy to understand and goes beyond the scope of this post).
Lots of professional traders for example earn money when stock goes up or goes down, the higher the swings the better, as long as the market moves these volatility traders earn money. Lets translate this to the web. We could say that there a loads of companies going after gold but are actually poorly managed, have the wrong/right people in the right/wrong place, or anything else that makes it that a company doesn’t work (the Joe and Jane Schmoes of this world). On the other hand we have some professional traders in the embodiment of professional and healthy companies that know there way around, build stuff that people want and earn money. Those are the companies who have the opportunity to grow and come out even stronger of this
The good things of a bad economy
Employee loyalty
Your employees will love you if you nurture them and can give them security that they can keep their job. As it becomes more difficult to find another job, your employees are more likely to stick with you then to try finding another job at another company.
Fire badly performing employees
First of all a bad economy urges companies to think over their strategy and their right of existence. If you have a company and you have employees that do not blend in very well, the crisis is a good excuse to use to lay off some staff. In Europe it is really hard to fire someone, but during the crisis even that is possible. I’ve heard some companies saying that they don’t need to lay off people cash wise, but do so because if there is a time to say goodbye to some people who are more happy somewhere else, that time is now. Everybody understands it.
Down to earth
Second, companies and their employees get down to earth again and focus on stuff they are good at (and makes money). No more wild and excessive parties, no more buying every gadget we think we need. No more Salmon and caviar for lunch (or is this a bad thing..). The message the economy sends us is clear. Hold your horses and go back work.
Less competition
Third, a lot of companies that are badly managed or are underpricing their services in the hope to get some market share will not make it through the downturn. This is good news if you have a company and have positive cash flows. You’ll survive these turbulent times, you might even come out stronger and you might loose some of your competitors along the way!
Internet services might find new clients
Fourth, I think companies are looking for a way to reduce costs, they’ll go over all costs and might find qualitative equal but cheaper ways to get the job done. In general this is good news for Internet companies (you need to have a good product or service though). A senior manager at Amazon mentioned that since the economic downturn they see an uptake in the use of their web services. I wouldn’t buy Amazon stock in the blind based on this info, but see it as an example how high-quality-low-costs services find new clients.
Buy things cheap
Of course, you need to have cash in the bank, but you can buy stuff or companies cheap now. We saw acquisitions in the banking scene (e.g. the Dutch government that bought the healthy part of Fortis, including ABN AMRO, for less than the price Fortis paid a year ago for ABN AMRO alone). But what about buying Yahoo! for almost 1/10th of the price you’d pay 8 years ago (Apple… maybe). And there are a ton of nifty startups out there that build a sweet service and are up for grabs for the bigger fish in the sea (publishers, wake up I’m talking about your chances here).
Buying companies now allows you to grow and will create you a stronger position after the crisis, if all goes right.
Read also this excellent essay of Paul Graham on Why to Start a Startup in a Bad Economy
Written on 1st November 2008
8 COMMENTS
Boris Veldhuijzen van Zanten, Serial Internet Entrepreneur
Without VCs many start-ups wouldn’t have a chance. Unfortunately with VCs many entrepreneurs also don’t have a chance. There will always be a power struggle between investors and entrepreneurs. Sure, they have a common goal: make the company successful. But unfortunately they also have a goal that is completely opposed to each others goals: they both want to make as much money as possible. If that means screwing each other out of some, so be it. Unfortunately, again, the entrepreneur is usually the one with less power in the relationship and so more likely to be screwed, if there is screwing to be done.
Last week Scott Rafer wrote a guest post with his ideas on the current economic crisis and what it means for entrepreneurs. One quote stuck with me:
“Instead, the Valley is delivering grimy voyeurism from ‘A-list bloggers’ or transient opportunism from VCs seeking to negotiate better inside deals with their portfolio companies over the next six months.”
Yep, what that says is that there is screwing to be done and if you are an entrepreneur there is a good chance that some venture capitalist has his cross hairs aimed at your ass.
So how can you defend yourself if you are starting your company? Here are some tips:
1: Be Independent
Yeah, easier said than done. And true in any situation. Still, try to stay away from the “We need 1 million upfront to build our infrastructure” ideas and focus on stuff you can build out of your basement. Once you have traction (cashflow & users) then talk to investors. You will be in a better position to make demands.
2: Think Different
Every VC out there is currently blogging, talking and tweeting about how bad the economy is and how we should all stock up on money if we can and accept any deal we can get. Very friendly advice indeed! Fact is, entrepreneurs are counter-cyclical thinkers. If there is an economic slump we of all people should be seeing opportunities! In a bull market anyone can make it. This is our finest hour and don’t let those blood sucking parasites tell you otherwise!
3: Be Prepared
When you are talking to a VC they will always make it seem like they want to buy a part of your company. Switch that thing around! Don’t be too cocky about it but think of it this way: you are buying a part of their money and are using your company to pay for it. It is a simple trick but will make your perspective completely different when talking to them.
4: Be Patient
With everybody else panicking now is the time for you to relax. Observe what is happening in your industry and who will panic first. Basically this market is now a huge game of chicken: who is going to fold first? Grow your company, concentrate on cashflow and focus on the future.
5: Ignore Everyone
Ignore all the naysayers around you. Don’t matter if they are bloggers, investors or family. You have a company with a product that people want. Focus on that! Unless you have a lot of shareholders you are the only individual who is truly independent. No pink slips for you because you are your own boss! Cover your ears, keep your eyes on the road and blow those competitors who only have eyes for their stock portfolios out of the water!
Economic crisis? Bring it on! This is the era of the entrepreneur and nothing can stop us!
Written on 27th August 2008
1 COMMENT
Ernst-Jan Pfauth, editor in chief
A report by Dow Jones VentureSource has a pessimistic conclusion: venture capital firms have invested significantly less money in European start-ups during Q2 than during the same period last year – the amount declined with 35 percent, to $1.3 billion. They’ve invested in 167 young companies, which is 42 percent fewer than last year. This year’s Q2 was the worst since at least 2000, when VentureSource started tracking European data.
The worst sector of all? Information technology. I assume that concerns our beloved Internet industry as well. The British IT industry, former leader, had to take the hardest punch, venture investment declined with a stunning percentage of 49.
Ram Srinivasan, a venture partner with European firm Wellington Partners explained to The New York Times what’s causing the slowdown in funding: “Europeans are wary of investing in start-ups until the United States markets stabilize and economic and political uncertainty recedes”.
The US venture investment also declined, yet not as sensationally as in Europe. The investments fell with 19 percent.
Written on 11th April 2008
5 COMMENTS
Ernst-Jan Pfauth, editor in chief
A study by Forrester shows that continental European companies are hesitant to outsource work like software engineering to countries like India. Forrester analyst Sudin Apte: “We are seeing only a few large offshore deals from Continental Europe, because companies there are still testing the waters, and the ramp up is very slow.” The United States though, are pretty fond of the Indian outsources. American companies make up for 60 percent of all the revenue made by Indian outsourcing companies.
Yet Indian companies foresee problems now the US economy faces a possible recession. Therefore they try to convince European companies to use their services. This turns out to be quite complicated, since European companies still insist on offering local service, partly due to local languages.
According to Apte, companies from U.K. and US are willing to change their systems and production processes. Even newspapers outsource editorial work. But a French company “would want its vendor to fully adopt French business practices, deliver from a local facility and interact in the local language”. But they do feel the need to start outsourcing on a larger scale, Apte said. “They will start with projects offshore that involve 30 to 40 people on a project, and then ramp up quickly”.
Written on 24th February 2008
6 COMMENTS
Ernst-Jan Pfauth, editor in chief
Mike Mann is rethinking domain tasting. He’s the founder of BuyDomains.com and now works as a VC for WashingtonVC. Domain tasting, or front running*, is the act of registering a domain name which you know somebody else is intending to register. Earlier, we reported that Network Solutions automatically registered domain names that people checked for its availability and that Google would make it harder for domain tasting companies to show up in the search results.
So Mann is rethinking a rather touchy subject. In an email he send to his personal mailing list, he said that ‘domain tasting is indiscriminate and buyers end up having their robots purchase other peoples’ clear trademarks, as well as a lot of lewdly suggestive names, or names that once resolved to questionable content. So it’s nothing I’d want my team to take part in’.
Yet that’s where the rethinking begins. And then Mann changes his mind:
In the past I thought nobody should do it. Today I think it should actually be done by others carefully for one simple reason: It’s good for the economy. People are typing in and clicking on legacy domain links for expired domains, and if they get a 404 error it’s a waste of time, energy and bandwidth – and nobody gets paid, however if it lands on a tasting speculators PPC page or monetizable site then someone is getting paid, and they can pay their employees, taxes, and tips at the local restaurant, etc. So domain tasting while lame in most respects is still good for the economy.
At first you might think: he’s right! But then, you hopefully realize that it’s just a justification thing for what his fellow domain traders do. Domain tasting isn’t good for economy, it hurts the ecomony. Why? For a number of reasons:
- Imagine somebody wants to start a new site with a name he absolutely loves, then it turns out that this domain is registered by a domain tasting company. That probably scares him off, so domain tasting actually blocks creativity and entrepreneurship;
- People lose their faith in the Internet, since the domain tasting pages are nothing more than a collection of sponsored links. Some even use pop-ups, automatic bookmark scripts or whatnot. When people don’t trust the web anymore, they will spend less time and less money online;
- Those ‘monetizable sites’ clutter the web and make it harder for users to find what they’re actually looking for.
Please Mr. Mann, start rethinking your thinking on domain tasting again.
* Update: Eric Litman provided some definitions of domain tasting and front running in the comments.
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